Cloud computing is one of the hottest trends weighing on CIO minds today. Cloud computing and the flexibility, agility, and cost savings it delivers is gaining tremendous momentum. Yet, despite its impressive adoption rate, it has yet to become mainstream. In no industry is this hesitancy toward cloud computing more pronounced than within financial services. This apprehension is clearly justified given the security, compliance and performance requirements inherent in today’s financial applications and systems. So how do today’s financial services companies navigate the cloudy skies ahead while remaining secure and compliant? Today’s financial services organizations need to take a look at what aspects of their systems are right for the cloud and which are not.

Pushing Commodity to the Cloud

On average, about 75 percent of the software utilized by today’s enterprises is commodity software. Corporate IT departments spend the majority of their time managing, maintaining and supporting systems that are not offering a significant competitive advantage to their business. Financial service businesses considering utilizing cloud architectures should look at the competitive advantages afforded by each of the systems under IT management and move the systems and applications lacking these advantages to the cloud. Not only can this save dollars related to hardware and software costs, but it frees up IT resources which can be better allocated to those systems that offer a true competitive advantage. Financial service businesses that move commodity software to the cloud and keep critical data applications on dedicated systems are able to leverage the benefits of the cloud while sidestepping the security and regulatory concerns.

Your Cloud Is Only as Good as the Network It’s On

In the financial services industry, the phrase “time is money” is more than a mere cliché; it’s a reality. In no area is this more prevalent than network connectivity and latency. Network connectivity is a trading firm’s lifeline. Ensuring a high degree of network availability and resiliency is paramount among decision makers. The speed at which a company can send and receive market and trade data is directly related to its overall success. That’s why low-latency, high-capacity networks remain significantly important within the financial services arena.

It is in this area where the cloud presents a sticking point for IT decision makers in financial services. Latency can vary significantly depending on the number of network connection points between the cloud provider and the application itself. Essentially, cloud computing architectures introduce latency into the equation, which instantly raises a red flag for financial services experts. Though this latency is being mitigated year-over-year, cloud computing remains less than ideal for market data and trade applications.

When putting non-trading, back-office applications in the cloud, network performance remains a key consideration. Network capacity, scalability and reliability are key contributing factors to consider in selecting a network provider. The connectivity between selected data centers and office locations will directly impact the success of the cloud computing solution.

Furthermore, IT decision makers must be aware of the sheer volume of data being transferred via the cloud. Applications that require regular updates with large amounts of data can quickly exceed the performance capabilities of the cloud as it is largely dependent on Internet performance.

Balancing the Cloud

For financial institutions looking to increase efficiency and reduce costs, the key appears to be balance. In the near-term, these institutions can leverage cloud computing for applications without critical latency, security or regulatory requirements while keeping other trading applications out of the clouds until technology matures to the point where latency and security no longer represent limiting factors.

David Bigelow is Sr. Manager, Network Planning & Architecture, RCN Metro, 508-616-7800; email: david.bigelow@rcnmetro.com; web: www.rcnmetro.com.